Cutting Edge Drapery

Drapery Fabricator Business Plan

Financial Plan

The business of Cutting Edge Drapery does not require substantial outlays for inventory and virtually all sales are on a cash basis, so increases in sales will not be accompanied by initial cash-flow deficits.

7.1 Break-even Analysis

Average per-unit revenue and variable costs are weighted averages based on sales/costs of each category of "products." It is assumed that each unit is a 15-hour job involving 2.5 installation hours.

Total fixed costs are a total of all other costs, not including production wages.

Monthly break-even is very achievable.

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7.3 Projected Cash Flow

As can be seen from the Cash Flow chart and table below, Cutting Edge Drapery has a number of advantages that provide for a large amount of growth in the company's cash account. Because it is the policy of the company's clients to provide the fabric for the soft window treatment products, the company has a very low cost of goods sold account and therefore a high gross margin. Furthermore, the custom nature of the business means that there is no inventory cost to speak of or accounts payable. Finally, the company does not posess any debt or long term capital assets that would affect the cash flow. With the ability to generate so much cash flow, it is assumed that the company will seek to use this asset to expand its markets and production capacity in the near future.

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7.5 Business Ratios

The following table outlines some of the more important ratios from the interior design/sewing industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7389.

Ratio Analysis

1998

1999

2000

Industry Profile

Sales Growth

58.58%

14.55%

6.31%

8.20%

Percent of Total Assets

Inventory

5.82%

4.00%

2.79%

3.80%

Other Current Assets

0.00%

0.00%

0.00%

44.20%

Total Current Assets

51.80%

73.13%

83.72%

74.30%

Long-term Assets

48.20%

26.87%

16.28%

25.70%

Total Assets

100.00%

100.00%

100.00%

100.00%

Current Liabilities

14.49%

9.91%

6.98%

49.00%

Long-term Liabilities

0.00%

0.00%

0.00%

13.80%

Total Liabilities

14.49%

9.91%

6.98%

62.80%

Net Worth

85.51%

90.09%

93.02%

37.20%

Percent of Sales

Sales

100.00%

100.00%

100.00%

100.00%

Gross Margin

52.52%

54.48%

56.47%

0.00%

Selling, General & Administrative Expenses

37.59%

35.28%

35.01%

81.40%

Advertising Expenses

4.09%

2.38%

2.24%

1.70%

Profit Before Interest and Taxes

8.78%

17.16%

21.36%

2.10%

Main Ratios

Current

3.57

7.38

11.99

1.49

Quick

3.17

6.97

11.59

1.17

Total Debt to Total Assets

14.49%

9.91%

6.98%

62.80%

Pre-tax Return on Net Worth

51.85%

66.17%

55.68%

4.20%

Pre-tax Return on Assets

44.34%

59.61%

51.79%

11.30%

Additional Ratios

1998

1999

2000

Net Profit Margin

5.68%

11.15%

13.98%

n.a

Return on Equity

33.56%

43.01%

36.42%

n.a

Activity Ratios

Inventory Turnover

10.91

11.12

10.73

n.a

Accounts Payable Turnover

12.51

12.17

12.17

n.a

Payment Days

27

28

29

n.a

Total Asset Turnover

5.05

3.47

2.42

n.a

Debt Ratios

Debt to Net Worth

0.17

0.11

0.08

n.a

Current Liab. to Liab.

1.00

1.00

1.00

n.a

Liquidity Ratios

Net Working Capital

$21,671

$61,156

$113,089

n.a

Interest Coverage

0.00

0.00

0.00

n.a

Additional Ratios

Assets to Sales

0.20

0.29

0.41

n.a

Current Debt/Total Assets

14%

10%

7%

n.a

Acid Test

3.17

6.97

11.59

n.a

Sales/Net Worth

5.91

3.86

2.61

n.a

Dividend Payout

0.00

0.00

0.00

n.a

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